Rupee again hits record low; trading below 58.50 vs dollar

The rupee hit a record low on Tuesday, with the absence of RBI intervention prompting importers to rush to cover future dollar needs, while exporters refrained from selling dollars in expectation that the rupee could fall further.

 

The rupee has plunged 2.8 percent so far this week, notching record lows for two consecutive days.

Some analysts believed pressure on the currency intensified after comments on the limitations of currency intervention by Reserve Bank of India Governor Duvvuri Subbarao on Friday.

 

"Fundamentally, INR will continue to depreciate because of CAD (current account deficit), but this move has happened too soon and too fast."

 

Analysts noted that while foreign institutional investors (FIIS) were still net buyers, the risk that they could turn sellers could force the central bank to intervene to at least moderate the volatility.

"The market is in a panic mode. Currently FIIs are still net buyers but if they turn sellers in coming days, in that case only hope will be RBI intervention for stability and with decent reserves, RBI can definitely stabilise volatility,"

The weakness in the rupee has prompted investors to exit their positions in the debt market while the domestic equity market is also under selling pressure.

Traders said a drop in other Asian currencies also hurt sentiment for the rupee.

At 10:15 a.m. (0445 GMT), the partially convertible rupee was at 58.66/67 per dollar, after hitting a life low of 58.7050 and 0.85 percent weaker than its previous close of 58.15/16 on Monday.

The rupee has dropped in 16 of the last 18 trading sessions and is down 8.3 percent since the start of May. The currency is the third-worst performer in Asia in 2013.

Traders will be watchful of any central bank intervention to prevent the rupee from weakening further. An absence of intervention by the central bank could push the rupee down to 59 later in the session, dealers said.